Climate change poses a child labour ‘threat multiplier’

Sustainable Development Goals (SDGs) and Child Labor

Introduction

Child labor is a significant risk that often remains hidden within corporate supply chains. The issue is further exacerbated by climate change. However, a newly developed AI-driven tool called the Child Labor Index aims to bring attention to this problem by scoring companies based on disclosure levels, public perception, and the commodity-level exposure of their supply chains to child labor. This tool can help fund managers identify high-risk companies and address the issue effectively.

The Impact of Climate Change on Child Labor

Recent research by the International Labour Organization reveals that climate change acts as a “threat multiplier” for child labor. Poverty caused by environmental disasters forces families to rely more on child labor, particularly in the agriculture sector where 70% of all child labor occurs. Droughts, floods, and crop failures have led to higher levels of child labor in villages in Cambodia, Tanzania, Uganda, Pakistan, Peru, Ethiopia, Nepal, and Ivory Coast.

Risks Faced by Richer Countries

Even wealthier countries with stricter production standards are not immune to the risk of child labor. In the United States, a child-labor scandal involving a meatpacking company owned by Blackstone Inc. triggered a crisis. The US Department of Labor also confirmed a child-labor probe of Tyson Foods Inc. and Perdue Farms Inc. Furthermore, an analysis by a firm owned by Goldman Sachs Group Inc. revealed that the US has slipped in its supply-chain ranking due to child-labor violations.

Regulatory Measures and Investor Responsibility

Regulators are now urging companies and investors to take more action. The European Union’s Corporate Sustainability Due Diligence Directive holds companies legally liable for environmental and human rights violations, including child labor, in their supply chains. The EU has also adopted a regulation prohibiting the sale or export of products made using forced labor. Similarly, Canada has implemented an act to end forced and child labor in corporate supply chains.

The Role of the Child Labor Index

The Child Labor Index aims to assist asset managers, pension funds, and other investors in monitoring 55,000 publicly traded companies to determine their compliance with the new regulations. By alerting investors to their exposure to child labor risk, the index can provide valuable insights. For example, it can reveal the extent of child labor risk associated with specific commodities used in climate-transition technologies such as solar panels, batteries, and renewable energy sources.

The AI-Driven Approach of the Child Labor Index

HACE, the UK-based startup that developed the Child Labor Index, utilizes artificial intelligence technology to scan thousands of news sources, corporate disclosures, and other information. The AI platform assigns a score between 1 and 100 based on a company’s disclosure level, public perception of its child labor risk, and the potential exposure in its supply chain. This approach helps eliminate human bias that could affect the scores.

Conclusion

The Child Labor Index, with its AI-driven tool, provides data points and engagement guidance for investors to push companies to address child labor. By raising awareness and monitoring risk, this index contributes to achieving the Sustainable Development Goals (SDGs) outlined by the United Nations. The index is currently being tested by asset managers and is expected to be commercially available later this year.

Sustainable Finance in Brief

The value of private credit deals in the oil and gas industry has significantly increased, reaching $9 billion in the 24 months leading up to the end of 2023. This growth is a response to regulatory and investor demands as many banks withdraw from the sector. Global ESG investors with $9.5 trillion under management, including members of the Net Zero Asset Owner Alliance, are now calling for more accountability in private markets. The alliance is expanding its protocol to include all private asset classes, pressuring private markets to reduce portfolio emissions. The new protocol requires members to target emissions cuts of 40% to 60% by 2030 compared to 2019 levels, without the use of carbon credits. Previous requirements mandated cuts of 22% to 32% for the five-year period ending in 2025.

SDGs, Targets, and Indicators

1. SDG 8: Decent Work and Economic Growth

   • Target 8.7: Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking, and secure the prohibition and elimination of the worst forms of child labor.
   • Indicator 8.7.1: Proportion and number of children aged 5-17 years engaged in child labor, by sex and age group.

2. SDG 1: No Poverty

   • Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions.
   • Indicator 1.2.2: Proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions.

3. SDG 2: Zero Hunger

   • Target 2.1: By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations, including infants, to safe, nutritious, and sufficient food all year round.
   • Indicator 2.1.1: Prevalence of undernourishment.

Analysis

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The issues highlighted in the article are connected to SDG 8: Decent Work and Economic Growth, SDG 1: No Poverty, and SDG 2: Zero Hunger.

2. What specific targets under those SDGs can be identified based on the article’s content?

Based on the article’s content, the specific targets that can be identified are:
– Target 8.7: Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking, and secure the prohibition and elimination of the worst forms of child labor.
– Target 1.2: By 2030, reduce at least by half the proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions.
– Target 2.1: By 2030, end hunger and ensure access by all people, in particular the poor and people in vulnerable situations, including infants, to safe, nutritious, and sufficient food all year round.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, there are indicators mentioned in the article that can be used to measure progress towards the identified targets:
– Indicator 8.7.1: Proportion and number of children aged 5-17 years engaged in child labor, by sex and age group.
– Indicator 1.2.2: Proportion of men, women, and children of all ages living in poverty in all its dimensions according to national definitions.
– Indicator 2.1.1: Prevalence of undernourishment.

These indicators can be used to track the progress made in eradicating child labor, reducing poverty, and ending hunger.

SDGs, Targets, and Indicators